Convening Meetings of Creditors and Contributors of the Company
Company Registration in Madurai – Convening meetings of creditors and contributors of the company is what we are going to describe below in this article.
A company is a separate legal entity, which is made by some association of peoples who may be natural or legal persons for commercial and industrial purposes. Basically, the company is registered and processed under the Rules and Regulations which is given in the Companies Act, 1956 and later it is revised in 2013. The Association may be directors, managers, creditors and contributors, shareholders and the employees. The Director of the company is responsible for all the activities of the company. The managing directors are responsible for each part of the company holds. The director can control the process of a company through convening a meeting at particular period basis. And also the creditors and the contributors are only responsible for the company’s debt processes. The cases, commentary and propositions of law in the context of section 465 of the 1956 Act will be relevant in interpreting the powers and role of the advisory committee in section 287 of the 2013 Act. In addition decisions in context of the English Law have also been examined below. These decisions will aid in understanding the development of and interpreting section 287 of the 2013 Act.
Convening meetings of creditors or contributors
The sending of a notice to a person as a creditor, for convening a meeting of the creditors under section 464 of the 1956 Act, will not stop the liquidator from disputing at a later stage his status as a creditor and refusing to admit his debt or claim. In this context see also the cases below, which it was held that court had powers to resummons a meeting or call for further meetings, and where a court could accept a person as creditor and subhect the same to cross examination. Where a person claimed to be a creditor and applied to be called to the meeting of creditors on the ground that though his deposits in the insolvent bank were in others names, the money belonged to him and he gave an affidavit to that effect, the court ordered that his affidavit evidence be accepted provided that he was prepared to face cross-examination. The court has power in proper cases to re-summon a meeting or summon a further meeting.
In response to a creditor’s application for calling of a meeting to ascertain the wishes of creditor or contributors, the liquidators sought an order directing them not to comply with requisition for a meeting to be convening. The court said although the [English] insolvency Act, 1986 imposed a duty on the liquidator to whom a requisition was addressed to summon a meeting, the court has jurisdiction to override that duty by directing the liquidator not to comply with it. In this case, the court found that the proper operation of the process of winding up the company and justice to all those interested in its assets required the court not to convene a meeting of the creditors of the company on the requisition of any creditor.
Rights of committee of inspection
It is through the committee of inspection that the creditors assert their rights and safeguard their interests. As explained by the Bombay High Court: “ No creditor of the company has any locus standi before the court in respect of any matter as regards administration of the assets of a company in liquidator. A creditor has no such right when the company is going concern and the position does not change when the company is a going concern and the position does not change when the company is in the process of winding up. Although, a creditor has no right of hearing, a body of creditors has the right to act with the liquidator. Section 464 of the 1956 Act, provides for appointment of a committee of inspection to inspection to inspect the accounts of the liquidator at all reasonable times (section 465(2) of the 1956 Act) and the liquidator may call a meeting of the committee as and when necessary section 465(3) of the 1956 Act). Section 464 of the 1956 Act provides that at the time of the passing of the winding up order or any time thereafter the court may appoint a committee of inspection to act with the liquidator. It is through the committee of inspection that the bodies of creditors have a right of audience in matters in respect of a company in liquidation.
Duties of committee of inspection
Facing a case in which a member of the committee secretly purchased an item of the Company’s property in the name of another person, Mootham CJ of the Allahabad High Court noticed that the responsibilities of a special committee of director’s inspection under the Indian Bankruptcy Act .Its duty in essence is to assist in the administration of the assets in the one case of the bankrupt and in the other of the company in liquidation. The position held by a member of a committee of inspection involves confidence so as to impress him with a fiduciary character. The position of a member of a committee of inspection under the Companies Act differs, in this respect, in no way from that of his counterpart under the English Bankruptcy Act. It is said in the case before us that the member paid a reasonable fair price for the property, but that fact is immaterial for. The rule is now universal, that, however fair the transaction, the cestui que trust is at liberty to set aside the sale and take back the property. In our opinion the facts in this case show the member knew quite well that he was not entitled to purchase the assets of the company without making a full disclosure and that it was for that reason that he bought the property in the name of another person”. The liquidator was accordingly entitled to set aside the sale. For Convening a meeting the rules formed by the Supreme Court as regards committee of Inspection, Rules 140 to 146 of the Companies (court) rules, 1959 given in the Appendix 27. It may be noted that the rules governing winding up under Chapter 20 of the 2013 Act are yet to be notified, and references to the Companies (Court) Rules 1959 are subject to this change. At the time of going to press section 464 of the 1956 Act was in force as were the Company (Court) Rules, 1959.
Fiduciary position of committee of inspection
The Allahabad High Court has held that the purchase of property of a company by a member of the committee of inspection is bad, as he occupies a fiduciary character in relation to the company. Section 288 of the 2013 Act mandates the Company liquidator to make periodical reports to the Tribunal, which should be filed at least once a quarter, with respect to the progress of the winding up. The form and manner of the report will be as prescribed. The Tribunal has the powers to review its orders on the application of the Company Liquidator and make modifications to previous orders passed. Hope you all understand the Convening meetings of creditors and contributors of the company and its rules and corresponding sections as mentioned in Companies Act, 2013 in this above article.
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